I don't like running WinXP on any less than 256mb of ram. That being said, I HAVE run XP with 128mb of ram, and it performs reasonably well all things considered, especially if you take some time to get rid of the bloat and the unnecessary animations and "XP look"
I would search eBay or computer forums for a 128mb stick of ram at least. You could probably get 512mb for around $50 or less if you look as well.